CARSON CITY — Squaring up with the Internal Revenue Service is never pleasant, but a Nevada board Tuesday jumped at the chance to repay $1.7 million in Medicare payroll taxes that haven’t been paid in more than two decades for judges and some other employees.
In return for voluntarily reporting the 27-year oversight, the IRS agreed to waive costly penalties and interest.
“This is a wonderful deal for the state and employees,” said Gov. Brian Sandoval, chairman of the Board of Examiners, which also includes Attorney General Catherine Cortez Masto and Secretary of State Ross Miller.
The federal government began requiring state and local governments to pay into Medicare in 1986. But judges and members of boards and commissions apparently fell through the cracks, with neither the employee nor state share paid for 27 years.
The problem was discovered after an audit this year. Under IRS regulations, the federal government can only demand back payments for three years.
Most of the money to settle the problem is coming from various accounts under the board’s control. The Legislature’s Interim Finance Committee will be asked approve taking $92,000 from a contingency fund to pay the rest.
Medicare payroll taxes are split between employees and employers. The state agreed to front the money that should have been withheld from wages, but the roughly 500 affected employees will have to reimburse the state nearly $848,000.
Officials said board and commission members who receive little pay may owe less than $10.
Employees who owe between $10 and $1,000 will be given one year to settle the debt. Others who owe more than $2,500 will have three years.
Those employees have been notified and provided monthly repayment amounts that will be deducted from their paychecks.
Employees who have already retired or left state service will be asked to forward their contributions to the state or face possible collection action, officials said.